A sign informs golfers to practice social distancing in Mt. Prospect, Ill. (Photo by KAMIL KRZACZYNSKI/AFP via Getty Images)
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Weekends are supposed to be a time for rest and relaxation—but even that has changed in the age of Covid-19.
A lot happened far beyond socially distanced neighborhood walks. President Donald Trump said the administration is “very confident” a vaccine will be ready by year-end, but also renewed attacks on China. Secretary of State Mike Pompeo took an adversarial tone on a Sunday morning ABC news program by suggesting Covid-19 was created in a lab. “The best experts so far seem to think it was man-made,” he said. “I have no reason to disbelieve that at this point.”
If that wasn’t enough, Warren Buffett’s Berkshire Hathaway (ticker: BRK.B) reported a $30 billion quarterly loss on Saturday. Accounting rules mandate Berkshire recognize stock market fluctuations in its income statement. With the S&P 500 down about 20% at the end of the first quarter, Berkshire’s huge stock portfolio took a hit.
It was all too much for the market. and stocks are looking weak Monday morning.
There a lesson in there: Weekends won’t offer investors solace soon.
—Al Root
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Trump administration Turns Up the Heat on China
The Trump Administration is ratcheting up its rhetoric against China.
Secretary of State Mike Pompeo said China “did all that it could to make sure the world didn’t learn in a timely fashion” about the extent of the Covid-19 outbreak. He added that there is “enormous evidence” that the coronavirus outbreak began in a lab in Wuhan.
- Pompeo’s comments come after the Washington Postreported that U.S. officials are beginning to explore ways to financially retaliate against China for the coronavirus pandemic, citing senior administration officials with knowledge of internal planning.
- Among the ideas that are being considered are stripping China of its sovereign immunity, which would allow China to be sued for damages, and canceling part of the U.S.’s debt obligations to China. None of these ideas has been decided on, the Post notes, and the White House’s discussions are still in their preliminary phase.
What’s Next: Secretary Pompeo said during his interview that China will be held accountable. What that means is unclear and unilateral American action such as a targeted default on U.S. debt may not even be technically possible.
—Ben Walsh
***
The Future of Airlines Looks Grim
“America will prevail again,” Berkshire Hathaway CEO Warren Buffett said at the company’s annual meeting—held remotely from Omaha, Neb., on Saturday. He’s not so sure, however, about the outlook for airlines. Buffett said his company sold its entire stakes in four major U.S. airlines, Delta Air Lines (DAL), Southwest Airlines (LUV), American Airlines (AAL), and United Airlines Holdings (UAL), for a loss.
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Airlines will need lots of debt to make it through the crisis and that, Buffett noted, will be a drag on their equity.
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Southwest has close to 400 planes that are parked and the planes that are flying “are virtually empty, CEO Gary C. Kelly, said on CBS’ Face the Nation. “Right now, we are at a low point,” he said, but “each week has gotten successively better.”
What’s Next: A surge in summer air travel seems unlikely. California, New York, and much of the rest of the Northeast remain under lockdown orders. And in Europe, France’s health minister advised against booking flights for summer vacations.
—Ben Walsh
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There’s Progress in the Worst-Hit Regions
The total number of coronavirus cases reported world-wide has passed 3.5 million, but the growth rate has slowed noticeably, particularly in some of the hardest-hit areas.
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Spain saw its lowest daily death toll in six weeks and Italy saw its lowest death toll since its lockdown began on March 10.
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In New York, the total number of Covid-19 patients hospitalized across the state dropped below 10,000 for the first time since mid-March.
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Still, President Donald Trump said Sunday night at a virtual town hall hosted by Fox News that the U.S. will lose up to 100,000 people, an increase from his earlier estimates of 60,000.
What’s Next: New hot spots are emerging, with Russia reporting over 10,000 new cases Sunday, its highest yet. And there are significant outbreaks in among workers in specific industries, such as meatpacking in the U.S., that could pose a significant risk despite being relatively small.
—Ben Walsh
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We’re Closer to Finding Out Who Had Coronavirus
Swiss pharmaceutical giant Roche Holding (ROG.EB) received emergency approval from the Food and Drug Administration for its test that screens for Covid-19 antibodies. Testing for antibodies uses the presence of the body’s own defense system against the virus to determine who was infected with the coronavirus including those who showed no or only very-mild symptoms.
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Roche says that the test is 100% accurate in detecting antibodies and 99.8% accurate in detecting their absence, meaning they produce a so-called “false positive” just twice every 1,000 tests.
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The other currently available antibody tests have faced concerns over their accuracy.
What’s Next: Roche says that it will be able to manufacture 100 million antibody tests a month by the end of 2020. That’s a level of production that makes testing every American for coronavirus antibodies feasible. But researchers still don’t know what level, if any, of immunity having those antibodies confers.
—Ben Walsh
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Can Germany Declare ECB Policy Illegal?
Markets are nervously awaiting a ruling by the German Constitutional Court, which will say on Tuesday whether the European Central Bank’s quantitative easing program complies with Germany’s Basic Law. The “public sector purchase programme” was launched in 2015 to help steer the eurozone out of its debt crisis and fend off deflation fears. The ECB has bought 2.2 trillion euros ($2.4 trillion) worth of government bonds since then.
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The ECB’s decisions are not subjected to the German court, but a negative ruling could prevent the country’s central bank, the Bundesbank, from participating in the program.
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The European Court of Justice has already ruled that the ECB’s program does not constitute monetary financing of government actions, and is a monetary policy measure.
- Tuesday’s ruling has no direct legal bearing on the newest ECB tool, its €750 billion, pandemic-specific bond-buying program.
What’s Next: The main consequences of a ruling against the ECB’s biggest program by the highest court of Europe’s largest country would not be legal but political. It would send ripples through markets and precipitate new fears about the eurozone’s long-term viability. But it could also prompt governments to complete the monetary union with a better definition of the central bank’s remit.
—Pierre Briancon
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Stocks Are Dropping After Buffett Drops a Major Bombshell. What You Need to Know. - Barron's
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